The Key Issue
A successful property developer granted a corporate guarantee on behalf of a family member’s hospitality business. Unfortunately, the onset of the Covid-19 pandemic disrupted the new venture, leading to its failure.
The liquidator of the business sought to scrutinize a tax-efficient scheme involving the transfer of an asset from one of the director’s companies to the individual, deeming it to be a director’s loan account.
With the liquidator employing the assistance of a litigation funder, the pressure escalated, and the threat of litigation loomed. The liquidator assigned the debt swiftly after appointment, prompting initial questioning of the legitimacy of the timeline.
Why The Client Came To Us
The large litigation firm that had become involved in this case had a massive amount of resources behind them. If this was not dealt with immediately, this litigation would escalate and become impossible for him to deal with.
Recognising the dire situation and the need for a proper defence, he contacted us. After speaking to one of our business specialists, he appointed us and we immediately began working on the case.
What We Did
Bell & Company promptly formulated a strategy to challenge and counter the points raised by the liquidator, this included:
Financial Analysis: As with all cases, we conducted a thorough analysis of our client’s financial situation. This involves a forensic analysis of their current position including their assets, liabilities and financial history. This created a foundation for us to negotiate from.
Legal Defence Preparation: We worked with our legal team, incorporating recent case law to bolster our arguments. While acknowledging our client’s liability to the claim, we focused on establishing a defence in the event of litigation, leveraging our expertise in negotiating debts for directors to construct a strong argument.
Negotiation and Settlement: Over a span of approximately six weeks from the appointment date, we engaged in negotiations with the liquidator to reach a favourable settlement. Simultaneously, we meticulously prepared a defence strategy to safeguard our client’s interests and present a viable alternative to litigation.
The Outcome
Through our diligent efforts, we secured the following settlement terms:
- An overall settlement amount of £285,000, significantly reduced from the liquidator’s initial claim of £796,000
- An initial payment of £25,000 upon signing the Settlement Agreement.
- We secured a manageable repayment schedule for the remaining balance of £260,000. This was financed with a bridging loan that we secured through one of our associates.
This case highlights the complexities surrounding corporate guarantees and how even when there may not be a clear director’s loan, liquidation can create one.
By leveraging our negotiation skills and deep understanding of debt resolution for directors, we successfully undermined the liquidator’s claim and negotiated a significantly reduced settlement. Our ability to construct a strong defence and explore alternative financing options ensured a satisfactory outcome for our client.
The swift resolution of this matter relieved our client of the burden and uncertainty associated with potential litigation, allowing them to focus on their property development ventures.